Can I Add to My 401(k) if I'm Not Working? (2024)

FAQs

Can I add money into my 401k? ›

But 401(k) plans are workplace retirement plans. As a result, you often can't write a check to your 401(k) plan to add money. Instead, the funds typically need to come out of your paycheck (through your employer's payroll process).

A 401(k) plan is only offered through an employer, which means you can't start investing in one on your own. If your employer does offer this type of retirement plan, you must sign up and figure out how much you wish to contribute. This is the amount that will be deducted from each paycheck.

If your budget is tight, if your investment options are too limited, or if you have to pay high fees to participate, then you may not want to max out your 401(k). You could invest for retirement in other ways, such as through an individual retirement account (IRA) or a standard brokerage account.

Indicators That it is Time to Pause 401(k) Contributions

If your income drops with no decrease in expenses — for instance, if you get laid off, demoted, start a small business, or take a lower-paying job — it may make sense to stop contributing to your 401(k) for a while to cover any shortfall.

Fidelity says by age 40, aim to have a multiple of three times your salary saved up. That means if you're earning $75,000, your retirement account balance should be around $225,000 when you turn 40. If your employer offers both a traditional and Roth 401(k), you might want to divide your savings between the two.

We found that 15% of income per year (including any employer contributions) is an appropriate savings level for many people, but we recommend that higher earners aim beyond 15%. So to answer the question, we believe having one to one-and-a-half times your income saved for retirement by age 35 is a reasonable target.

As a result, the knee-jerk reaction for many advisers is to encourage people to max out savings — and even max out a 401(k). But that's not always realistic. Retirement planning is a balancing act of putting money aside for later, while keeping enough readily available to pay for stuff now or in the near future.

The truth is, maxing out contributions to a 401(k) plan isn't the right choice for everyone. But if you're at a certain point in your financial journey where you can invest more money toward your retirement future, it could be a game changer.

You probably want to do more than save the max.

If your entire retirement plan is built on maxing out your 401(k), I have some bad news: Contributing the annual maximum to your 401(k) doesn't guarantee a comfortable retirement.

“Typically, at younger ages it is hard to contribute the maximum amount to retirement plans because of other goals — paying off college loans, buying a house, etc. There has to be a balance between the goals,” Lisa Featherngill, national director of wealth planning at Comerica Bank, told GOBankingRates in an email.

Is a 401k worth it if no match? ›

We generally recommend contributing to a 401(k) even if your employer doesn't match, but you might want to pass over the 401(k) if: You can't afford to make any contributions to a retirement account (in which case you should take a hard look at your budget and start planning how you can start saving).

Brokerage accounts are taxable, but provide much greater liquidity and investment flexibility. 401(k) accounts offer significant tax advantages at the cost of tying up funds until retirement. Both types of accounts can be useful for helping you reach your ultimate financial goals, retirement or otherwise.

Once you start contributing money to a 401(k), you then have to choose investments. Otherwise, your contributions will sit in a money market account.

Eligibility. You must work for an employer that provides a 401(k). You must work for an employer that provides a Roth 401(k). There are no income limits like a Roth IRA has.

By age 30, you should have one time your annual salary saved. For example, if you're earning $50,000, you should have $50,000 banked for retirement. By age 40, you should have three times your annual salary already saved. By age 50, you should have six times your salary in an account.

In 2022, the most you can contribute to a Roth 401(k) and contribute in pretax contributions to a traditional 401(k) is $20,500. In 2023, this rises to $22,500. Those 50 and older can contribute an additional $6,500 in 2022 and $7,500 in 2023.